FHA 100 Mile Rule
To have multiple FHA loans or use rental income on a departing residence, the FHA 100 mile rule must be followed
Often buyers are relocating to a new area and 1) need a 2nd FHA loan for one of many reasons and/or 2) need to count the rent on the departing residence to qualify. FHA loans offer so many options for 1st time or subsequent buyers such as:
- Low down payment
- Allows for down payment assistance
- Lenient on lower credit scores or past issues
- Forgiving on previous bankruptcies, foreclosures, & short sales
- Student loans with Income Based Repayment
- Higher debt ratios
- Co-signors that will not occupy the home
- Gifted funds for down payment
Buyers looking to purchase a new home with an FHA mortgage while keeping their current residence, must comply with some FHA rules based on the new handbook 4000.1 effective 9/14/2015.
Below are reminders of several sections of FHA Handbook 4000.1 that apply to the “FHA 100 mile rule”
- Departure Residence Rental Income: Using rental income from a property being vacated by the borrower: If rental Income is being derived from the Property being vacated by the Borrower, the Borrower must be relocating to an area more than 100 miles from the Borrower’s current Principal Residence.
- Multiple FHA loans: A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA– insured Mortgage if the Borrower is:
- Relocating or has relocated for an employment-related reason; and
- Establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.
- Military Personnel / Occupancy: The Lender must obtain a copy of the Borrower’s military orders evidencing the Borrower’s Active Duty status and that the duty station is more than 100 miles from the subject property.
Written By: Russell Smith